explain the difference between low/moderate and high_risk cases
Answers
Low-risk investing not only means protecting against the chance of any loss, but it also means making sure that none of the potential losses will be devastating.investors accept the notion that investment risk is defined by a loss of capital and/or under-performance relative to expectations, it makes defining low-risk and high-risk investments substantially easier.
high-risk investment is one for which there is either a large percentage chance of loss of capital or under-performance—or a relatively high chance of a devastating loss. The first of these is intuitive, if subjective: If you were told there’s a 50/50 chance that your investment will earn your expected return, you may find that quite risky. If you were told that there is a 95% percent chance that the investment will not earn your expected return, almost everybody will agree that that is risky.nature, with low-risk investing, there is less at stake—either in terms of the amount of invested or the significance of the investment to the portfolio. There is also less to gain—either in terms of the potential return or the potential benefit bigger term.The second half, though, is the one that many investors neglect to consider. To illustrate it, take for example car and airplane crashes. A 2019 National Safety Council analysis told us that a person’s lifetime odds of dying from any unintentional cause have risen to one in 25—up from odds of one in 30 in 2004.1 However, the odds of dying in a car crash are only one in 102, while the odds of dying in a plane crash are minuscule: one in 205,552.2